Spotlight Interview: Mariano DP of MakerDAO
Thank you for joining us for this edition of the NovaBlock newsletter. Here, we explore the intersection of technology, finance, politics, and of course, the crypto asset space.
We’ve covered DeFi quite a bit already in this newsletter. For all our readers, please tell us about yourself and your role at MakerDAO.
Hi Leeor, my name is Mariano DiPietrantonio, and I work at the MakerDAO Foundation as the Community Lead in Buenos Aires. That is my title, but in terms of my day to day, I travel around Latin America observing how people use money in different situations.
How are users in Latin America interacting with Dai and crypto assets more broadly? Are people really using crypto as a hedge against inflation and irresponsible monetary policy? Or is usage mostly speculative?
Latin America is a big place, with different groups of people in each country, each with different needs, realities, and economies. So when you have so many different situations and actors, sometimes it can be difficult to summarize how people use crypto. But something interesting is that in the past two years we have been seeing a common pattern emerge in this region. Crypto is mainly used as a tool to “hedge irresponsible monetary policies,” as you said. Argentina and Venezuela are obvious examples of this, exacerbated by capital controls, but also in the past few months Chile and Brazil have been slowly devaluing their currency due to various factors. Protests in Chile differ from Brazil’s thriving economy, although both currencies are being devalued against the US Dollar.
So, what is the main point here?
All citizens of these countries need a stable and accessible store of value. Some to escape devaluation of a “risky country,” others to gain access to investment opportunities in a “competitive global economy.” And it so happens that Dai and DeFi are meeting these two needs.
How does Dai differ from other stablecoins like Tether, USDC, Paxos, etc? What are the benefits of using a decentralized stablecoin like Dai over centralized ones?
Every stablecoin has tradeoffs that users need to be aware of. For example, centralized stablecoins can provide a greater pool of liquidity due to its centralized minting nature, but also possess a single point of failure, seizable bank accounts or coin freezing features.
Eric Wall posted on twitter a very good brief about popular stablecoins in the market, highlighting these tradeoffs. You can make your own conclusions.
What is the purpose of launching Multi-collateral Dai (MCD)? How does it differ from Dai prior to launch of MCD?
For MCD, there are several changes in the system, all of which are aimed to provide a more robust protocol capable of handling a higher debt ceiling (Dai market capitalization).
In terms of risk, the addition of new collateral will provide increased diversification. Since the protocol will not solely rely on ETH as collateral, the system will be more resilient to volatility.
Also, there was a complete redesign of the oracle system to support a wider range of price feeds with a higher grade of decentralization and anonymity for the data providers.
There was a change in the naming of some components of the protocol so newcomers can have a better understanding of the tools at first glance. For example, “CDPs” were renamed “Vaults.”
Another important addition is the Dai Savings Rate, which I personally think is a game changer for the financial world.
What are the first assets that will be added as collateral for MCD?
BAT is the first one, others will be voted by the MKR token holders according to what is discussed in our Forum and in our Governance Calls, which everyone is invited to participate.
Add to your calendar, calls take place every Thursday 9 AM PST - Zoom Link
What assets do you see being added in the future? What types of assets will be tokenized and used as collateral?
The answer lies solely in the hands of MKR voters.
The flexibility of the Maker Protocol means that almost any kind of asset that can be tokenized can be made available as collateral in the system, as long as it has appropriate risk parameters. To ensure that the system is capable of supporting a wide range of asset types, the Maker Foundation built within it a series of “connectors” to allow for real-world collateral testing and auditing of MCD.
The first collateral types to be tested were chosen by the Maker Foundation based on diversity, an average daily volume of several million USD, and the relative stability of each token. That is why BAT was chosen.
You mentioned the addition of the Dai Savings Rate (DSR). What is it and why is it considered the “trust-free rate”?
The DSR will allow all Dai holders to earn savings automatically and natively by locking their Dai into the DSR contract. DSR also presents new opportunities to cryptocurrency traders, startups, and established businesses to increase the return on their Dai holdings and Dai operating capital.
DSR’s true power lies in its simplicity: with a few simple steps, users not only earn an attractive return on their Dai holdings via Dai’s native platform, but they also earn it without fees.
Whether you are an individual, entrepreneur, trader, partner, or developer, the DSR is a powerful new tool for you and the entire DeFi ecosystem to earn positive yield. The current DSR is 2% APR, which will change over time according to the governance actions of the Maker community.
Benefits for All Users
The DSR helps balance the Maker Protocol. Funded from the Stability Fees paid by Maker Vault owners, the DSR acts as another mechanism to help balance the entire system to maintain Dai’s peg to the US Dollar.
The DSR presents no liquidity impediments.
No minimum deposit is required to earn the DSR, and users can withdraw any or all of their Dai at any time. Dai is simply either “in” or “out” of DSR Mode.
The DSR preserves user control.
Dai holders retain total and independent control over their locked-up Dai at all times, and only a Dai holder may remove their Dai from the DSR.
The DSR is free and available to any Dai holder.
Dai holders can earn savings automatically and natively by locking their Dai into the DSR. While other platforms, such as Compound, currently permit Dai users to accrue a return on their Dai, Dai users can earn directly via the Maker Protocol with the release of MCD. One of the best features of DSR—in addition to users retaining control over their Dai—is that it does not require a user to make an initial deposit of a specific amount, maintain a minimum daily balance, pay monthly fees, or adhere to withdrawal limits. One only has to lock their held DAI in the DSR smart contract to take advantage of the DSR’s benefits.
The idea of offering high yielding savings accounts to anyone with an internet connection is extremely compelling. However, we have been seeing interest rates drop. What do you foresee the interest rate being in the future and how can it be used to grow the DeFi ecosystem?
Interest rates are a powerful tool and it is hard to foresee future rates in this young environment. Nevertheless, present rates are attractive if you take into consideration that every week another central bank around the world cuts its rates and many have now gone into negative territory. To become the future of finance, DeFi has to beat the banks and it is already doing so on returns and ease of use. With users having custody of their own funds which are secured by smart contracts, banks appear pretty much redundant in comparison.
Will financial institutions interact with Dai? Or do you view MakerDao and Dai to be purely a retail investor/user phenomenon?
I think that Dai and DeFi won’t be just a retail phenomenon. Every day we see new products and services being built in this ecosystem and it is just a matter of time before financial institutions start using it, not only for the convenience, but also because clients will demand so.
What types of use cases and financial products will MakerDAO enable in the future?
I will answer you with another question...have you ever imagined something like Uber, Airbnb or Kickstarter the first time that you sent an email? Certainly not! I think that we will see a Cambrian explosion of ideas, products and services in the coming years that will add another layer of value to the financial world. To name one product, I think Synthetic Assets will be huge.
How can our readers get in touch with you?
I rant a lot on twitter with the handle @mariandipietra, or if you want to say hi my email is marianodp@makerdao.com
Quick Hits
Blockchain technology may be the best weapon against deepfakes. Deepfake videos are becoming more prominent and enable people to create convincingly realistic “fake news.” Data recorded on a blockchain is difficult to tamper with, since information is verified and stored by a large number of distributed nodes. For example, a signature can be added to each camera with a unique private key built into the chip. The camera then signs each frame of footage using this key, and the video data hash and camera signature are recorded on the blockchain.
HSBC moves $20 billion from paper to blockchain in one of the biggest financial deployments. The HSBC platform will digitize paper-based records of private placements. The new platform, known as Digital Vault, will give investors real-time access to records of securities bought on private markets. Blockchain-based solutions will become the standard for record keeping of private placements and other securities. Beyond more efficient record keeping, digital securities enable increased liquidity, instant settlement, fractional ownership, automated compliance, and other benefits to investors.
Bitcoin-based IRA investments to break $1 billion soon. The pension crisis is deepening across the world due to increased inflation, diminishing bond yields, and stagnant markets. In the search for yield, Bitcoin-based retirement products are now taking center stage. The Bitcoin IRA, which is already processing over $350 million, is projected to reach investments for over $1 billion shortly. It is exceedingly difficult to acquire Bitcoin with low fees in retirement accounts. We applaud products and initiatives reducing frictions and enabling people to access the crypto markets easily, cheaply, and securely.